Health budget hit in latest update

August 12, 2013

The Federal Government expects to save almost $390 million from cheaper medicines, but has been hit by a surprise $180 million slug for private health insurance subsidies, according to a pre-election reckoning of its Budget position.

The Commonwealth’s Economic Statement, released just two days before the Federal election was called, showed there has been a massive $33 billion write-down in anticipated revenues since the May Budget, pushing Government finances deeper into the red and forcing a desperate scramble for savings.

Treasurer Chris Bowen said the Rudd Government had been compelled to make “responsible” savings worth $17.4 billion over the next four financial years in order to help ensure the Budget returns to a narrow surplus of $4 billion in 2016-17, after an unexpected blow-out in the deficit to more than $30 billion this financial year.

Health is among many areas of expenditure that have been hit hard as the Government has tightened the financial screws.

In addition to massive cutbacks outlined in the May Budget, including freezing Medicare rebates until mid-2014 for a saving of $664 million, a virtual doubling of the Medicare Extended General safety net threshold to $2000 and a wind-down in the tax offset for medical expenses, the Government has revealed it expects to save an extra $388 million this financial year, and $2 billion over the next four years, by extracting better pricing deals from drug companies having their products listed on the Pharmaceutical Benefits Scheme.

But this saving will be largely offset by increased expenses in other areas, including an extra $276 million this financial year, and $1.5 billion over four years, for new and amended listings on the PBS and the Repatriation Pharmaceutical Benefits Scheme.

In a result that has given a lie to warnings there would be an exodus from private health insurance when means testing for the rebate was introduced, the Government has had to make provision for an additional $184 million in private health insurance rebate payments in 2013-14 – an additional $769 million over four years – because of unexpectedly high take-up rates.